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Did you know that even if you’re resident in Canada when you die, if you own a property in the U.S. – perhaps a vacation home in Florida, a ski chalet in Idaho or U.S. securities – you may be subject to U.S. estate tax? This article from BDO looks at some of the U.S. estate tax issues that Canadian residents (who are not U.S. citizens) should keep in mind if they own (or are considering buying) U.S. property.
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The Long Arm of FATCA

Ed McCarthy

US expats often encounter challenges living overseas, but FATCA—the Foreign Account Tax Compliance Act—is making life even more difficult for some of them. FATCA requires foreign financial institutions to give the IRS information about financial accounts held by US taxpayers or those held by foreign entities in which US taxpayers have a significant ownership interest. In addition, US citizens who own foreign financial assets above specified amounts must file an annual ‘Statement of Specified Foreign Financial Assets’ form with their tax returns. Media reports describe US citizens being “locked out” by foreign financial services institutions that are canceling their accounts and refusing to open new ones. FATCA’s filing requirements are also exposing past tax-reporting errors and generating potentially large liabilities and penalties.
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The family cottage is an important part of the legacy for those who wish to leave it for future generations to enjoy. What many don’t realize, however, is that cottage have increased significantly in value, and 50 per cent of this increase could be taxable at death. There are several strategies you can use to help ensure a tax-effective transfer of the family cottage to your heirs.
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Canadian citizens and residents may be exposed to U.S. estate, gift, and generation-skipping transfer tax (together, “U.S. transfer taxes”) on the value of certain property gifted or transferred during lifetime or on death. Without realizing it, you and your executors and trustees may have certain liabilities and obligations under the U.S. transfer tax regime. The key is effective co-ordination between both the U.S. and Canadian tax regimes to minimize tax and optimize each situation, including by taking advantage of deferral opportunities and available exclusions, credits and deductions.
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